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Tuesday, April 11, 2017

The robots are coming

The advance of technology is the biggest reason workers are earning a shrinking slice of the income pie, according to a new study by the International Monetary Fund Across the majority of advanced economies, workers have received a declining share of national income since the early 1990s, while a growing share of productivity gains has been captured by the owners of capital. The IMF’s finding is significant because economists have been debating what’s to blame for decades of sluggish wage growth. President Donald Trump has blamed trade with countries such as China and Mexico for hurting American workers and hollowing out the nation’s manufacturing sector. The IMF study suggests technology is a bigger driver.

In 29 out of the 50 largest economies, the share of national income received by labour fell between 1991 and 2014, according to the IMF analysis. Those 29 economies accounted for around two-thirds of global output in 2014. Those countries that initially had a higher share of jobs that could be automated have tended to experience a sharper decline in the labour income share.

About half of this decline can be attributed to the impact of technological progress, which has made it easier to automate routine tasks such as cashiers, proof-readers and machine operators. , according to new analysis from the IMF. The most non-routine tasks, which are least susceptible to automation, include activities like farming, firefighting and teaching very young children.

This has been more important than globalisation in affecting how much workers have benefited from economic growth. Increased globalisation was also found to have reduced the labour income share in advanced economies. But, even though this factor has received considerable publicity in a number of advanced economies since the financial crisis, the IMF report found it accounted for only around a quarter of the overall decline. The picture for emerging markets is different. There the IMF found that globalisation, rather than technological change had been the principal driver of the decline in the share of national income going to workers. “Global integration, and more specifically participation in global value chains, was the key driver of declines in labour shares in emerging markets,” said the IMF report. It is the result of capital deepening that is not necessarily accompanied by dislocation of employment or reduction in wages

When wages grow more slowly than productivity, labour’s share of income falls as the owners of capital reap gains at a quicker pace. Because capital tends to be concentrated among the wealthy, a falling share of income for workers and vice versa for capital owners is likely to lead to rising income inequality, the study concludes.